Bob Architect, Vice President, Compliance and Market Strategy, VALIC, started his workshop by explaining that under IRC 3121(w)(3)(A)(B), churches include:  

•  Churches, conventions or associations of churches, and church controlled schools;   

•  and Qualified Church Controlled Organizations (QCCO) 

• church controlled 501(c)(3) offering goods, services or facilities substantially less than the cost of providing them, and  
• no more than 25% of support from “non-church” revenue. 

There are tens of thousands of participants or potential participants in these entities’ plans – a large opportunity, Architect said.  

For these entities, there is no written plan document required, unless the plan is a 403(b)(9) retirement income account; the Employee Retirement Income Security Act (ERISA) does not apply, unless the organization elects to be covered by ERISA; and section 403(b)(12) non-discrimination rules are not applicable, including universal availability and ACP testing for employer contributions.  

However, these entities must follow the applicable requirements of the 403(b) regulations, including adhering to statutory contribution limits, remitting salary deferrals timely and monitoring for loan and hardship limits.  

Architect explained that 403(b)(9) retirement income accounts are plans in which the defined contribution plan investments are not limited to annuities or custodial account mutual funds, although 403(b)(1) annuities and 403(b)(7) custodial accounts can be offered in “9” plans. However, mutual funds are not considered custodial accounts for purposes of excise tax.  

These accounts are generally seen in the “larger” conventions of churches, and oversight is provided by the church pension board, Architect said.

Special Rules for Church Plans   

There are special rules for church plans, not applicable to other 403(b)s.  

Architect explained that for clergy, post retirement distributions designated for reasonable housing costs are tax-free. This applies to 403(b)(9), 403(b)(1),403(b)(7) and any church retirement plan. The distribution must be designated and used strictly for housing costs. Architect said Revenue Ruling 75-22 explains more.  

Self-employed clergy and clergy employed by a non-church employer can participate in an established church plan, but cannot establish their own plan. Finally, includible compensation for clergy does not include tax-free housing allowance.   

For church plans, years of service are counted for all years with the church, not just with the current church employer. This is true for the special 15-years-of-service catch-up provision allowed for 403(b) plans.   

Under 415(c)(7)(A) a church can contribute a maximum of $10,000 per year even if it’s not includible compensation, up to a lifetime limit of $40,000. The limit is the difference between includible compensation and $10,000 per year.  

For foreign missionaries, under 415(c)(7)(C), a church can contribute up to $3,000 per year (even if ther is no U.S. taxable compensation). This is applicable only to missionaries with $17,000 or less in adjusted gross income.

Other Notes   

There are also “church plans” sponsored by Code Section 414(e) religious employers, Architect explained.  These entities are controlled by or share a bond with non-religious employers. These plans must have a written plan document, even if they are only funded through 403(b)(1) annuities or 403(b)(7) custodial accounts, and are subject to non-discrimination rules.  

However, plans of 414(e) religious employers are exempt from ERISA, unless they elect ERISA coverage.  

Architect added that 414(e) organizations can sponsor 457(b) plans for the “rank & file” (unless ERISA coverage is elected).  

Architect also noted that non-discrimination rules do apply to churches and QCCOs sponsoring 401(a) and/or 401(k) plans, and churches and QCCOs can sponsor non-qualified deferred compensation plans. They are not subject to the rules of 457 but are subject to 409A. Rebecca Moore

According to the Principal Financial Well-Being Index, the top four wellness benefits offered are online wellness information (19%), educational tools or resources (18%), fitness center discounts (17%) and printed wellness information (17%).

The top four benefits employees would most like to see their employer offer are fitness center discounts (25%), on-site preventive screenings (22%) and access to wellness experts such as nutritionists (21%) and onsite fitness facilities (19%).

Employers encourage their employees to participate in wellness programs offered at the workplace in a number of ways. Nearly two in 10 employees (18%) indicated their management encourages them to participate in wellness benefits. Sixteen percent of employees are offered lower health insurance costs for participating in wellness benefits at their workplace. Another 12% of employees are offered other financial incentives (such as gift certificates or discounts) or offered cash incentives for participating.

According to the survey, employees (including those not offered wellness benefits in their workplace) were asked to identify three benefits that would encourage them to participate in a wellness program.

•  Nearly one in two employees (45%) chose better overall physical health as a benefit of participating in a wellness program.

•  Other top mentions included receiving a meaningful incentive from their employer for participation (30%) reduced personal healthcare costs, greater chance of living a longer, healthier life and reduced stress (29% each). The employer making it convenient for them to participate was mentioned by 23% of employees, down significantly from 28% in 2010.

Other findings from the survey show:

•  About two out of five employees (41%) strongly agree or somewhat agree that wellness benefits encourage them to work harder and perform better.

•  Four in 10 employees (40%) strongly agree or somewhat agree that having an employer sponsored wellness program would encourage them to stay in their current employment situation. Compared to 2010, these results are down from 48%.

•  Just over a third of employees who use at least one wellness program once a year (35%) agree strongly or somewhat that they have missed fewer days of work by participating in a wellness program. (This is up from 28% in 2010.)

•  Slightly more than half who use at least one wellness program once a year (52%) agree to some extent that they have more energy to be more productive at work by participating in a wellness program. Compared to last year, these results are up from 37%.

•  Over half of employees (55%) rated wellness activities offered by an employer very successful or somewhat successful in improving health and reducing health risks, while about a quarter (24%) were neutral in their rating (neither successful nor unsuccessful). Two in 10 employees (20%) were more skeptical about the success of wellness activities (somewhat unsuccessful or very unsuccessful rating).

•  Employees who are offered health insurance through their employer were asked what they anticipate will happen with their insurance in 2012. Nearly two thirds (62%) expect their premiums will increase, 43% of employees expect their deductibles will increase, 28% expect a change in medical plan options, and about a quarter of employees (24%) expect a reduction in coverage.

 This Principal Financial Well-Being Index survey was conducted online within the U.S. by Harris Interactive on behalf of the Principal Financial Group between October 20 and October 31, 2011, among 1,121 employees and 533 retirees.

When most people think of YouTube, they envision comedic homemade videos, sports clips, or excerpts from television shows, but the popular Web site, www.youtube.com, also can be a business tool that 401(k) advisers can use for prospecting, researching, and even networking purposes.

The added bonus? YouTube is free. Here, we outline simple and advanced ways you can use this Web site effectively in your practice. Before uploading a video, however, it’s crucial to check your company’s compliance regulations. 

WAYS YOU CAN USE YouTube

Providing tips & information. You can use YouTube to provide retirement tips and other industry news and information to plan sponsor clients or prospects, or to retirement plan participants. While you can make your own videos (and that might be more advantageous for reasons discussed below), you also can point people in the direction of videos already available online. Ameriprise Financial, for example, features a video on YouTube about tax benefits associated with the Roth IRA conversion opportunity, while Charles Schwab features a real-life retirement story.

Prospecting. In addition to attracting viewers by presenting useful infor­mation, when you create a video, it can create a potential advantage over other social-networking media like Twitter and LinkedIn by allowing viewers to hear your voice and see your facial expressions. This, in turn, could create the illusion of an introduction and might make it easier to follow up with them later. (Of course, plan sponsors have to open the e-mail or click on the link to access the video.)

Researching. You also can view other videos in the industry for research purposes. Do retirement plan advisers in your local market have videos online? What about potential strategic relationship partners such as CPAs and third-party administrators? On what industry information are your competitors focusing? What types of videos are they posting? How often do they post new videos?

Increasing digital presence. Having a YouTube video can increase your Web search visibility because many search engine results give priority to video platforms such as YouTube. Advisers also can increase traffic on their personal Web sites by cross-linking YouTube to their Web sites.

GETTING STARTED

Creating an account. If you’re simply visiting YouTube for research, you don’t have to create an account. If you want to upload a video, however, you must sign up for an account by entering basic information like your e-mail address, username, password, and so on. Aside from uploading videos, with an account, YouTube also allows you to comment on videos, create your own channel, and create specialty accounts, which allow for customization of your profile page.

Creating/uploading videos. You easily can create a video with a camcorder or digital camera that has a video feature and upload it to your computer. Once your recording is satisfactory, you can upload it to YouTube from your computer. You also can use the Quick Capture feature, which allows you to record videos instantly with your computer’s Webcam, if you have one. Although the video has to be of a quality to be visible and understandable, it doesn’t have to be professional quality.

Promoting your video. To attract an audience initially, you can send your YouTube video link to your e-mail contacts, or highlight it in your LinkedIn profile or other social-media networks. Ask politely if these contacts can view the video and forward it to more people.

Creating a group. You can join an existing industry group or create one and then send the URL to people you want to invite—for example, plan sponsor clients, or participants. You also can allow other group members to post videos or have forum postings. Groups allow people with common interests to exchange information.

Creating a list of favorite videos. You can create a QuickList or a playlist of your favorite industry-related videos. You also can subscribe to your favorite video channels, which show any new videos by that person the next time you log on.

Networking. With your YouTube account, you can communicate with other users by posting text comments or video responses. You also can communicate privately with other users by sending messages that will be sent directly to their accounts.

Corie Russell

Question 8 on Form 8955-SSA asks whether the plan administrator provided an individual statement to each participant required to receive a statement. The instructions to the form add that the plan administrator must, before the expiration of the time for the filing of the form, furnish to each affected participant a statement setting forth the information required to be contained in the form.  

A plan administrator may answer “yes” to question 8 if the required information was furnished in a timely manner to participants in other documentation such as benefit statements or distribution forms. A separate statement designed specifically to satisfy this requirement is not required.   

A plan administrator may answer “yes” to Question 8 if the statements or other documentation issued to the participants include the following information: 

• Name of the plan  
• Name and address of the plan administrator  
• Name of the participant  
• Nature, amount, and form of the deferred vested benefit to which such participant is entitled.  

Thus, for purposes of completing Form 8955-SSA, the plan administrator’s notice to the plan participant does not need to include the participant’s social security number, the codes on page 2 of the Form 8955-SSA used to identify previously reported participants, or any information regarding any benefits which are non-forfeitable if the participant dies before a certain date.  

The Form 8955-SSA was created because, as part of the redesign on the Form 5500 annual report several years ago, the requirement to report participants with deferred vested benefits on Form 5500 Schedule SSA was eliminated. However, the IRS still wants to gather information about participants who terminate with a deferred vested benefit. The first Form 8955-SSA filing, for the 2009 plan year, may be due as soon as January 17, 2012 (see (b)lines Ask the Experts – Who Is Responsible for Reporting Form 8955-SSA Data?).   

More instructions from the IRS are available at http://www.irs.gov/retirement/article/0,,id=238959,00.html.   

The new FAQ is available at http://www.irs.gov/retirement/article/0,,id=252298,00.html .

Lucas added based on the survey results, plan sponsors need to keep on top of their use of automatic features. “We are seeing plan sponsors adapting at a slower rate in regards to automatic enrollment and automatic contribution,” said Lucas. “As the economy improves, it might be a good opportunity for those not offering these features to reconsider. It’s tough to do in a challenging economy. As the economy improves they might want to reconsider.”

Lucas also mentioned plan sponsors have been making changes to their target-date-funds. “The one change is plan sponsors have been looking at different share classes in the target-date-fund. However, they still use those offered by their recordkeeper,” said Lucas. “The target-date-fund landscape has changed a lot over the past few years, and if they have not looked again, it might be a good opportunity to look at a broader field of target-date-funds.”

Other results from survey include:

•  One in three (31.5%) plan sponsors replaced a fund or manager last year due to performance. Most affected were large cap domestic equity funds.

•  TIPS/real return was the most added fund type in 2011, but TIPS were added at three times the rate of real return funds.

•  Plan sponsors that changed their active/passive mix of funds increased their use of passive funds by 44.8%—far more than active funds in 2011 at 6.9%.

Callan’s 2012 DC Trends Survey was conducted in the fall of 2011, and includes responses from nearly 100 U.S.-based companies with more than $85 billion in assets.

Source: Plansponsor.com

Voluntary benefits are optional programs that are made available at the workplace and 100% paid for by employees.  Eighty-five percent of employers say they offer one or more voluntary benefits including life insurance (63%), disability insurance (56%) and dental insurance (52%). Ranking lower on their priority list were critical illness insurance (35%) and long-term care insurance (33%).

“For employees, the benefits offer a convenient and affordable way to purchase life, disability, long-term care, dental and vision insurance, while offsetting the income-related risks of a disability, long-term illness or the death of the family member,”  says Jim Gemus, senior vice president of Prudential Group Insurance.

Employees increasingly view the workplace as an important source for personal insurance and savings products. Half (51%) of workers cited convenience as the most common advantage and driving factor in purchasing voluntary benefits because they pay for them through payroll deduction, representing a nine-point increase since the study was conducted in 2008.  Fifty-two percent feel that offering voluntary benefits increases the value of their company’s offerings.

The study found a correlation between voluntary benefits offerings and employee satisfaction. For employers, employee satisfaction is the top gauge of success (47%) followed by achieving a certain set participation rate (34%). Gemus notes, “Employees’ increasing interest and knowledge of their benefits options, combined with employers’ renewed focus on employee satisfaction is a win-win situation for all

Many plan sponsors have not paid much attention to the U.S. Department of Labor’s current effort to substantially broaden the definition of a plan fiduciary, agrees Lynn Dudley, Senior Vice President, Policy, at the Washington-based American Benefits Council. They do it at their peril, she suggests. “Because there are so many lawsuits based on investment menus and investment choices, this is not something to take lightly,” she says.

In September, the Labor Department announced that it will re-propose regulation, which is expected to happen in 2012. That follows the issue of the original proposal in October 2010 to expand the meaning of the fiduciary term, defining it as “a person who provides investment advice to plans for a fee or other compensation.”

The far-reaching original proposal faced lots of opposition. It “would fundamentally change the entire body of law that governs $6 trillion of ERISA assets,” says Bradford Campbell, who is Of Counsel at law firm Schiff Hardin LLP in Washington. David Bellaire, General Counsel at the Roswell, Georgia-based Financial Services Institute, says the decision to re-propose “is a move by the Department to remove the political pressure they were feeling, to give them a little time and space” to come up with a revision.

Dudley has talked to Labor Department officials about their rationale for making a change. “Their view is that a lot has changed since the definition of ‘fiduciary’ was originally done, and the role of service providers has changed a lot,” she says. “In their view, it is not always easy to tell who is a fiduciary and who is not. If they want to hold someone accountable, it is harder to do, if they do not know whom exactly to hold accountable and for what.”

The definition under ERISA always has been complex, says Roberta Ufford, a Washington-based Principal at Groom Law Group. “It is all facts and circumstances, and a five-part test. It has never been an easy test to apply, an easy test for people in the industry to understand,” she says. The original Labor Department proposal made sweeping changes to that definition, she says. Says Dudley, “The approach they felt more comfortable with is that you are not a fiduciary only if you fit an exemption. You would have to be exempted out.”

The current regs are “making it far too easy for today’s advisers to avoid fiduciary responsibility,” says Phyllis Borzi, Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA). “The result is all too often that plan sponsors must solely bear the responsibility for advice they received from the adviser that was flawed due to bias or conflicts of interest, and are often the sole targets of legal actions that may follow. Workers also suffer when the advisers they relied on for unbiased advice failed to live up to this standard, and the funds they were counting upon were eviscerated due to shoddy advice.”

Despite deciding to revise its proposal, it seems clear that the Labor Department still intends to broaden the definition significantly, says Donald Myers, a Washington-based Partner at law firm Morgan, Lewis & Bockius LLP. “It does look like they do not plan to go back to the original version,” he says. The DoL apparently wants everybody providing advice to plans to do so on the same terms, Campbell says.

Service providers will reevaluate their offerings when a proposal ultimately becomes final, Ufford says. The idea that some providers will stop working with plans because they do not want to become fiduciaries seems less likely to her, given that the retirement system makes up a big part of the investment industry, but they might limit their services in some ways, she says.

Employers need clarity about whether new rules would apply in a bunch of situations, Dudley says. If an employee asks a company bookkeeper if a plan option is a good investment, does that make the bookkeeper a fiduciary? Do these new rules mean that non-employees, such as legal counsel and third-party benchmarking companies, will become plan fiduciaries? If a participant contacts the call center and talks with a staffer about how to diversify, does that cross the fiduciary line? Do sponsors need to renegotiate vendor agreements?

“The DoL has suggested that one of the fixes is to propose exemptions to permit some of the conduct that would have been prohibited under the previous proposal,” Campbell says. “However, I am not terribly optimistic that what they propose will adequately address some of the questions. The ideological underpinning of the initial proposal is at odds with the exemptions they now say that they are going to provide,” he says of the belief that giving investment advice has inherent conflicts.

In the next round, look for Labor to spell out more clearly the sales exemption for those marketing their products and services to sponsors. “They have said that they will make an exemption when a buyer should know that they are not a fiduciary because they are selling something to the buyer,” Campbell says. With the original proposal, he says, “It is not clear when the sales exemption is applied and how broadly. For instance, does it apply if a plan has signed on to a platform but not yet picked investments?” The initial proposal gave many the impression that someone would not have to provide a plan individualized advice to become a fiduciary, and the DoL has indicated it plans to clarify that. “What if you create generic fund menus or asset allocations that are used by plans?” Ufford asks. “The test always has said that the advice has to be individualized to the plan.”

Likewise, routine appraisals for ERISA purposes of plan assets not publicly traded—such as real estate holdings and private equity—previously have not been treated as fiduciary acts, Ufford says. Under the original proposal, that apparently would have changed. For appraisers, it would add another layer of regulation and potential liability, she says. If appraisers continuing to work with plans must become fiduciaries, she adds, “My guess is that some of the service providers currently providing valuations would be unwilling to do so.” Those that kept doing it would need to take extra steps such as getting fiduciary insurance, in turn leading to additional potential fees for plans.

Much of the ire around the original proposal centered on its potential impact on IRA rollovers and distribution planning. EBSA’s Borzi says that IRA assets now exceed those in 401(k) plans, and IRA holders do not have the benefit of a plan sponsor to help them. They need good investment advice, she says. “As millions of Baby Boomers are nearing or entering into retirement and rolling their assets out of the plan environment, these protections are needed more now than ever,” she adds.

Judy Ward

In 2004, 9.3 million Americans–or one in every 25 adults–were victims of identity theft, according to a report by the Better Business Bureau and Javelin Research. The Federal Trade Commission (FTC) estimated that identity theft crimes tallied $52.6 billion in fraud that year, or almost $200 for every man, woman, and child in the U.S. Identity theft has been the fastest growing crime in the US for the past three years, according to the FTC, which predicts that in five years, the majority of Americans will have been victimized by identity theft.

Identity theft wreaks significant damage on its victims. The most recent figures from the Identity Theft Resource Center (ITRC), which conducts extensive research and reporting on such crimes, are that out-of-pocket expenses related to identity theft have risen to $1,495, up from $808 in 2002, plus $16,000 in average lost wages.

The average time it takes victims to recover from identity theft has risen to 607 hours, up from 175 hours in 2002. While personal liability is low in the majority of cases, a survey for Nationwide Insurance showed that 16 percent of victims were forced to pay an average of $6,440 to cover thieves’ purchases. And perhaps the greatest impact is long-term, as victims remain vulnerable for the rest of their lives. The ITRC reports that identity thieves are likely to use stolen data months or years later.

In 2005, there were at least 104 serious “data incidents” in the U.S. that compromised the records of more than 56.2 million people. And the New York Times reported last year that a worldwide criminal identity marketplace has now matured, with credit card numbers, Social Security numbers, and other personal data commonly traded and sold in huge numbers.

Employers Have A Major Stake

The number one underlying source of identity fraud is theft of employer records. A Michigan State University study found that 51 percent of all identity thefts occur in the workplace, usually perpetrated by people hired to perform low-level tasks, such as data entry.

While many businesses are most fearful for the security of their client records, payroll records are more often what’s stolen, and with increasing frequency. About 90 percent of business record thefts involve payroll or employment records; only about 10 percent involve customer lists, according to the FTC.

On June 1, 2005, a new provision of the Fair and Accurate Credit Transactions Act (FACTA) took effect. It states that any employer whose action or inaction results in the loss of employee information can be fined by federal and state government, and sued in civil court. An employee is entitled to recover actual damages sustained if their identity is stolen due to the employer’s inaction, or statutory damages up to $1,000. Employees may also bring class-action suits against employers for actual and punitive damages. In addition, federal fines of up to $2,500 per employee, and state fines of up to $1,000 per employee also may be levied.

A recent case in Michigan highlights another source of corporate liability. In the 2005 case of Audrey Bell et al vs. AFSME AFL-CIO Local 1023, the Michigan Appeals Court affirmed a jury award of $275,000 to AFSME members who had sued the union for failing to safeguard its members’ Social Security numbers. It recognized a special relationship between the union and its employees, including a duty to protect them from identity theft by providing safeguards to ensure the security of their most essential confidential identifying information, information which easily could be used to appropriate a person’s identity.

The Bell case has national implications for employers. Arizona, California, Illinois, Texas, and other states have statutes that require an employer to restrict the use and disclosure of Social Security numbers. While not as broad as Michigan’s law, they support the view that a “special relationship” exists between an employer and an employee whose data is stolen from the employer to commit identity theft.

Even in jurisdictions with no statutes restricting employers’ use or disclosure of employee Social Security numbers, the tide of legislation on identity theft may be sufficient to support a finding of the necessary special relationship. The Wall Street Journal recently predicted that there will be a flood of lawsuits by both consumers and businesses because of identity theft issues.

Employers also suffer other significant costs when their employees experience identity theft. Conservative calculations based on current identity theft figures indicate that an employer with 1000 employees, who make an average of $40,000 salary per year, should expect to incur productivity losses of more than $600,000 per year. Identity theft also threatens enterprise security, enabling corporate espionage and fraud, and theft of hard assets and intellectual property. Large scale or frequent identity thefts also results in significant negative publicity, impacting sales, partnerships, and employee recruiting and retention.

Protection As An Employee Benefit

One solution that provides an affirmative defense against potential fines, fees, and lawsuits is to offer some sort of identity theft protection as an employee benefit. An employer can choose whether or not to pay for this benefit. The key is to make the protection available, and have a mandatory employee meeting on identity theft and the protection you are making available, similar to what most employers do for health insurance.

Employees can elect either to accept or decline to have identity theft coverage. If employees have coverage and become identity theft victims, the employer gains: The victimized employees will spend less time and money, and experience less frustration in restoring their identities. If employees decline the coverage and later claim their identities were stolen as a result of the company’s actions, the employer has signed proof that they attended the presentation and declined the coverage.

Identity theft protection as an employee benefit is becoming a trend because employers are looking for ways to lower their costs. It’s unique, it’s hot in the marketplace, and it’s relatively inexpensive.

Greg Roderick, CEO of Frontier Management, says that his employees “feel like the company’s valuing them more, and it’s very personal.”

“I think it’s a tremendous value to protect someone’s name,” said Matt Oros, CEO of Benelogic. “It is like a soft pillow at night that you can lay your head on and know that you’re going to have an advocate.”

And Donald Harris, head of the International Association for Human Resource Information Management’s (IHRIM) Special Interest Group on Privacy & Security, said “Privacy is like diversity in this regard: Done the right way, each involves respecting and empowering individuals, and reaping the business benefits that this can bring, rather than acting primarily to avoid risks and legal problems.”

Do Your Homework

Keep in mind that there are significant differences among the programs that are available. Many new programs are now appearing on the market to take advantage of the fear and confusion around identity theft. It is possible to spend hundreds of dollars on partial solutions that do not effectively prevent identity theft or protect the user from harm.

The services offered tend to fall into four categories:

1. Computer protection – anti-virus, anti-spyware, wireless security, etc.
2. Guidance on protecting against a variety of exposures of personal data – from shredding documents, to opting out of marketing databases, to tracking data in Social Security, driving, medical, and financial databases
3. Credit monitoring – at varying levels of frequency, sometimes with alert services in the event of credit inquiries or changes
4. Insurance coverage – sometimes including assistance with identity recovery activities

There are high quality programs available in each of these categories, that, taken together and used diligently, will significantly reduce the majority of identity theft risks and will provide basic protection and recovery from harm. However, it can be very costly to purchase the superior programs in each category, so it is important to look for low-priced, bundled solutions that address the full range of identity protection, and are updated to deal with new threats.

Peter Marshall